March 7, 2006
Council remains concerned about potential effect of renewable-energy mandate on costs, reliability
New York State should implement its new renewable portfolio standard (RPS) in a way that minimizes increases in New York’s already high energy costs and ensures that the reliability of New York’s electricity system is not undermined, The Business Council told two Assembly committees in testimony today.
In its testimony, the Council also said that New York State’s top energy priority should be siting new electricity-generating capacity.
“We are not opposed to renewables. Our companies have been the beneficiaries of the state’s most abundant form of renewable energy - hydropower,” Anne Van Buren, the Council’s director of telecommunications and transmission policy for the Council, said in testimony before the Assembly Committee on Energy and the Assembly Subcommittee on Renewable Energy.
“What we do object to is being forced to subsidize those renewables that are not cost competitive,” she added.
Van Buren reminded lawmakers that The Business Council has long expressed concerned about New York’s high costs and the effect of the RPS on electricity costs.
Citing data from the Energy Information Administration, Van Buren noted that New York’s average energy price for all sectors in 2004 was 57 percent higher than the national average.
What’s more, the state Energy Plan adopted in June 2002 noted that “energy prices tend to be important factors in business location and expansion decisions, particularly for energy-intensive businesses. Corporations routinely favor locations that have the greatest profit potential. Less profitable facilities will, at best, not be expanded. At worst, they will be closed, with a resultant loss of jobs.” The plan went on to say that “the cost of energy, however, remains an obstacle to overcome in New York’s efforts to retain, expand, and attract business.”
The state Public Service Commission (PSC) ordered creation of the RPS in August of 2005. Besides adding a $24 million annual surcharge to New Yorkers’ electric bills, the RPS will require that 25 percent of electricity purchased in New York by 2013 be from renewable resources. This is expected to drive up electricity costs in New York State that are already among the nation’s highest.
The Council’s testimony suggested that:
- The PSC should review the effects of the RPS on the programs
costs and effects more frequently than its original order required.
The next scheduled review is set for 2009, the testimony noted.
An earlier review is needed “to gauge how well the program was working and to determine if our expressed concerns on price, reliability and capacity were, in fact, occurring,” Van Buren said. She noted that the RPS is expected to impose costs of some three-quarters of a billion dollars over the life of the program.
- The state’s focus in energy policy should be on adding
generating electricity -generating capacity to ensure reliability.
Van Buren noted that the a December 2005 reliability assessment
by the New York Independent System Operator (ISO), which administers
New York State’s electricity grid and electricity market,
concludes that New York State does not meet minimum reliability
standards over the next 10 years.
The testimony noted that this need is especially great Downstate, but that “the greatest potential for siting renewable generation will come in upstate areas, particularly Western New York.”
- To site the conventional power plants that New York State needs
to ensure reliability and drive costs down, New York State should
reauthorize Article X of the state’s Public Service Law.
That law, which expired at the end of 2002, was designed to expedite
the process by which power plants were sited in New York State.
“Without expedited review and permitting, New York will suffer a shortage of generation capacity before too long,” the testimony said. “The more demand rises in coming months and years, the more consumers will pay for lack of additional generation.
“Adding significant amounts of wind power does not negate the need to add more generation to ensure system reliability during periods of peak demand.”
The testimony concluded, “The bottom line is New York needs more baseload power. Businesses and residents alike use more electricity than ever before. We can import some power from other states and Canada, but for cost and reliability reasons, we need more generation capacity right here at home - as well as improved transmission and distribution lines to deliver power where its needed.
“Rather than striving to increase the cost of electricity, state leaders should fulfill the promise of the State Energy Plan by reducing government-mandated surcharges on energy bills.”